But Guaranty, which sued in federal court in Milwaukee last spring after Lehman asked for the money, contends Lehman is not justified in seeking that much under terms of a previous settlement.

Lehman responded to Guaranty's lawsuit last month by requesting that U.S. District Court Judge Pamela Pepper in Milwaukee either dismiss the lawsuit or move it to New York, where other legal action involving Lehman's bankruptcy, including a claim against Guaranty, is being heard.

The judge is now considering Lehman's motions in the case.

Guaranty, which was hit hard by the housing crisis, has been striving since the Great Recession to return to sustained profitability. Guaranty posted a $4.1 million loss in its fiscal year 2015, which ended in September. The company had a $231,000 profit in 2014.

The Wisconsin bank has sold its wholesale mortgage unit and taken other steps in its effort to improve its financial condition. Its capital levels have improved, but are still short of standards required by regulators.

With assets of about $1 billion, Guaranty is the 16th biggest bank based in Wisconsin.

Doug Levy, chief executive of Guaranty, said Tuesday he could not comment on the litigation.

Guaranty argues that it had a deal with Lehman going back to a 2010 case in which Lehman sued Guaranty and demanded the bank pay for loans it sold Lehman that allegedly breached loan-purchase agreements.

Guaranty contends that under settlement terms of the 2010 case, Lehman is limited to seeking repayment of what Lehman has distributed to creditors, not the full $26.4 million in Guaranty mortgages that Lehman sold to third parties.

Guaranty asserts that Lehman is asking for the full amount of the mortgages in question, even though in some instances Lehman has paid less than the full amount — or zero in one instance — to those who have claims against Lehman in connection with the mortgages it sold.

The bank states in its lawsuit that Lehman is seeking 'an amount substantially in excess of Guaranty's maximum liability.'

Guaranty also is asking Pepper to decide whether the statute of limitations has expired on Lehman's claims. Guaranty's last loan sale to Lehman took place in 2007. Lehman says the statute of limitations doesn't apply because its settlements with creditors over the loans in question took place in 2014.

The lawsuit by Guaranty was filed in May 2015, but last month, Lehman responded by asking that it be dismissed. If a dismissal is rejected by Pepper, Lehman is requesting that Guaranty's lawsuit be transferred to federal court in New York. That's where officials overseeing the bankruptcy — one of the biggest in U.S. history — are familiar with similar cases involving Lehman as well as the type of argument Guaranty is making, Lehman contends.

'The bankruptcy court in the Southern District of New York is uniquely positioned to decide this case, and such a ruling will thwart the piecemeal litigation and forum shopping attempted by Guaranty,' attorneys for Lehman stated in a court filing.

But Guaranty says the parties had agreed in the first settlement that the 'exclusive venue' for any dispute arising from that settlement would be U.S. District Court for the Eastern District of Wisconsin.

Lehman also contends Guaranty violated a confidentiality agreement from the 2010 settlement by revealing some terms of the settlement when the bank filed its lawsuit against Lehman last May.

An attorney representing Lehman declined to comment on the case.

Read or Share this story: https://www.jsonline.com/story/money/business/2016/03/22/guaranty-bank-lehman-brothers-square-off-in-court-over-mortgages/84929144/